Repsol YPF: Higher Prices, Margins in ABB Offset Lower 2005 E&P Profits

Higher crude prices and refining margins helped Spanish oil company Repsol YPF (NYSE: REP) increase its operating profit from its Argentina-Brazil-Bolivia business unit (ABB) in 2005, offsetting a decline in profits from ABB's E&P business, the company said in its year-end earnings statement.

Operating profits from ABB's refining and marketing activities rose 123% to 563mn euros (US$667mn) from 252mn euros the previous year, while operating profits from ABB's E&P business fell 13.8% to 1.6bn euros from 1.86bn euros in 2004.

Revenues from ABB's E&P operations totaled 5.07bn euros in 2005, up 4.3% from 2004, while Ebitda increased 2.1% to 2.84bn euros with respect to the previous year.

Repsol YPF's ABB crude oil and liquids production averaged 379,000 barrels a day (b/d) in the fourth quarter of 2005, down 8.4% from the same quarter in 2004, the statement said.

The fall was mainly attributed to a 9.3% drop in Argentine production with respect to the previous year due to the natural decline of mature fields and the loss of 8,600b/d due to labor strikes. On the other hand, production in Bolivia increased 4.7% in the quarter compared to 4Q04.

Repsol YPF's overall liquids production averaged 531,100b/d in 2005, down 6.4% from 2004.

Repsol YPF's overall 2005 gas production rose 1.6% to 3.42 billion cubic feet a day in 2005 compared to the previous year due to higher production in Bolivia, Trinidad & Tobago and Venezuela, offsetting the 5% production drop in Argentina and Algeria, the statement said.

Bolivian gas production reached 545 million cubic feet a day (Mf3/d) in the fourth quarter compared to 4Q04 due to a 9.9% increase in exports to Brazil and Argentina.

Venezuelan gas production rose 3.1% to 323Mf3/d in 4Q05 following the start of operations in the Barrancas block in September 2005.

Despite lower gas production in Argentina, gas prices there rose to US$1.34 per thousand cubic feet in 2005, up 24.3% compared to the previous year.

Repsol YPF announced in January that it adjusted its total proved reserves downward 25%, or 1.25 billion barrels of oil equivalent (Bboe) - of which 71% of revisions were gas - concentrated 52% in Bolivia and 41% in Argentina.

The adjustment relates primarily to lower-than-expected natural gas reserves in Argentina, Bolivia and to a lesser degree Venezuela and other countries.

Repsol YPF's 2005 investments in E&P totaled 1.95bn euros, up 64.4% on 2004. Investments in ABB's E&P activities alone climbed 33.9% to 978mn euros in 2005.

Fourth quarter investments in E&P were 1.02bn euros, 248% above 4Q04, due to the completion of the company's asset purchase in Peru and Trinidad & Tobago, the purchase of mining acreage in Brazil and Venezuela, and higher investments in development, the statement said.

Investments in development represented 38% of total investment in the quarter, spent mostly in Argentina (76%), Trinidad & Tobago (12%), Venezuela (12%), Bolivia (6%), and Ecuador (6%).


Repsol YPF's Latin American sales increased 5.2% in 2005 compared to 2004 as a result of 9.4% growth in Ecuador and 8.3% growth in Peru, where natural gas has entered capital Lima, coupled with good performance in other countries.

In Spain and ABB, sales to Repsol YPF's own network were higher while exports fell. Repsol YPF posted revenues of 7.22bn euros from refining and marketing at its ABB operations, up 20.3% from the previous year.

Repsol YPF's average selling price for crude and refined products in 2005 was US$37.14/b compared to US$30.85/b in 2004.


Latin American derivatives margins rose 24.3% to US$256 a ton from US$206/t in 2004.

Revenue from chemicals increased 20.5% to 691mn euros in ABB in 2005, while operating profits rose 29.4% to 176mn euros as compared to 2004.


In Latin America, enhanced earnings in distribution were mainly driven by the organic growth of activities throughout the region, the statement said.

Repsol YPF posted global 2005 net profits of 3.12bn euros, up 29.2% compared to 2004 due to high crude prices and refining margins, the company said.

Revenues for the year were 51.0bn euros, up 26.7% from 2004, while operating profits in 2005 climbed 31.5% to 6.16bn euros.

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